8. Should SCE be Authorized to Add Certain Service Offerings and Fees That Were Not Included in the Original Schedules or to Revise Certain Service Offerings and Fees?

In addition to increasing or decreasing DA service fees for 31 existing services, SCE proposes to add 47 new service offerings and fees, and to recover from ESPs the costs for DA services performed for ESPs that were previously recovered through a different regulatory mechanism established in D.99-09-064 pursuant to § 376.¹¹⁶

SCE proposes new or revised fees for establishing service with ESPs, processing Customer Information Service Requests (CISRs) and DASRs, providing UDC Consolidated Billing, performing meter reading, terminating service with ESPs, providing meter installation, testing and maintenance services, and for miscellaneous services.¹¹⁷ SCE also proposes to change five existing service fees from fixed fees to fees charged on a T/M basis. Appendix A lists the proposed services and fees, and identifies the fees that we approve.

As discussed above, AReM and CMTA object to the proposed service fees that were developed using OEA estimates, and to the inclusion of corporate and division overhead costs included in any of the proposed fees. AReM and CMTA also object to service fees for SCE-initiated activities, and do not want to pay for activities resulting from SCE errors.¹¹⁸ AReM and CMTA are particularly opposed to the proposed MAMF.¹¹⁹

SCE responds that the proposed service fees were developed using cost-causation principles, and were calculated using accepted and valid methods in order to better align them with the actual cost of the services provided, thereby reducing cost shifting among DA participants and bundled service customers.¹²⁰ SCE states that AReM and CMTA do not deny that the services are necessary for DA participants, and agree that cross-subsidization is not desired. SCE contends that the service fees are appropriate and should be adopted.

Discussion

The following sections address proposed service offerings and fees requiring special discussion. Issues concerning OEA estimates and overhead loadings are discussed in Section 5 above.

8.1. Discretionary Services And Fees

As stated above, because discretionary services are services for which there are sufficient providers to ensure customer choice, proposals to add or revise these fees do not impede ESPs' ability to compete or to serve DA end-use customers in SCE territory. This is because ESPs may provide discretionary services themselves or obtain them from non-UDC providers.

As discussed in Sections 4 and 5 above, we have concerns with aspects of the methodology used to develop the service fees, and we are not confident that the costs underlying those fees are as accurate and reliable as we would prefer. However, because we wish to establish at this time, to the extent possible, up-to-date service fees, the proposed additions and revisions to discretionary service fees should be approved. We are less concerned with the accuracy of the costs underlying fees for discretionary services than with the costs for non-discretionary services. If the fees for discretionary services are in fact too high, ESPs and DA customers can obtain those services elsewhere. Therefore, SCE should be authorized to add new fees and to revise existing fees for discretionary billing and metering products and services as identified in Appendix A.

SCE should be authorized to file a Tier 2 advice letter to add new fees and to revise existing fees for discretionary billing and metering products and services listed in Appendix A. SCE should file the advice letter within 60 days of the effective date of this decision. The advice letter should become effective upon approval of the Energy Division.

8.2. DASR Fees

SCE proposes to charge ESPs fees for connecting, disconnecting, cancelling and rescheduling DASRs, updating DA customer accounts, or switching DA customers' ESPs.¹²¹ These are non-discretionary services. Customers may obtain these services by contacting an ESP or, in some cases, they may contact SCE directly. We are concerned with SCE's proposals to charge ESPs fees when a customer directly contacts the utility for disconnecting and cancelling DASRs, updating DA customer accounts, or switching DA customers' ESPs.

D.97-10-087 approved the interim DA tariff for the UDCs, including provisions permitting UDCs to assess a charge for accepted DASRs, if that fee was approved by the Commission.¹²² The Commission has not yet approved any DASR fees. The adopted interim tariff provides that any approved DASR charge will be billed to the ESP unless the customer is requesting to return to UDC service where the charge will be billed to the customer.¹²³

D.97-10-087 drew an analogy to the situation in competitive interexchange telecommunications where a new telephone customer is free to choose among the many interexchange carriers when the customer first signs up for service. Importantly, in the telecommunications industry, the customer is billed for changes in service providers, where here SCE proposes to instead charge ESPs when customers contact SCE directly to exercise their choice in selecting service providers.

D.97-10-087 left open the possibility of temporarily waiving initial DASR switching fees for existing customers to help to level the competitive playing field between ESPs and UDCs, but deferred this issue to the Anticipated Proceeding that would examine the appropriateness of non-discretionary fees. Although D.97-10-087 foresaw situations where end-use customers might return to bundled service or change from one ESP to another, it did not consider UDCs fees for facilitating these choices.¹²⁴

SCE's cost-causation principles state that "the individuals who cause the costs to the system should pay for those costs."¹²⁵ Because the customer is the cost causer when, for example, it chooses to return to bundled service and contacts SCE, the customer should be responsible for the cost resulting from its decision.

Consistent with provisions adopted by D.97-10-087 with respect to customer-initiated DASR disconnections, SCE's Disconnect DASR Fee should not be charged to ESPs when a customer chooses to return to bundled service. The proposed Disconnect DASR fee does not comply with the requirement in D.97-10-087 or the DA tariff,¹²⁶ and should not be approved.

As with the Disconnect DASR fee, the customer is the cost causer when it chooses to stay with its current ESP or SCE's bundled service and contacts SCE to cancel a DASR, or when a customer contacts SCE to update its account or switch ESPs.¹²⁷ SCE's proposal to charge ESPs in cases where a customer contacts SCE directly to request DASR services is inconsistent with SCE's cost-causation principles.

Although D.97-10-087 does not address situations where an end-use customer cancels a DASR that is not erroneous or unauthorized, or where a customer contacts SCE for other DASR services, we find the customer is the cost causer when the customer directly contacts SCE for DASR services. Therefore, consistent with provisions adopted by D.97-10-087, if DASR fees are eventually adopted, when a customer contacts SCE directly to request DASR services the applicable fee should be billed to the customer requesting the service.

However, we are reluctant to make a final determination on this issue in a proceeding that does not have the benefit of participation by other UDCs and a broader range of interested stakeholders. As stated above, we believe proposals to charge ESPs for end-use customer choices raise important policy issues that should be considered in a statewide context. Therefore, we will not authorize SCE to bill ESPs when a customer contacts SCE directly to request DASR services, but defer a final determination of this issue to the Anticipated Proceeding where the appropriateness of DA fees and costs will be considered.¹²⁸

8.3. ESP Termination of Service Fees

As stated above, D.97-10-087 requires UDCs to develop service fees for non-discretionary services based on recurring incremental costs.¹²⁹ Permitting SCE to determine costs on a T/M basis each time ESP Termination Services are provided does not ensure that those costs will be computed consistently or that the costs for these non-discretionary services will be priced at their recurring incremental costs in compliance with D.97-10-087. Instead, we prefer to consider specific rates for approval before they are charged to customers. Therefore, SCE's request to price ESP Termination services on a T/M basis should be denied.

SCE contends that the costs of returning a large volume of customers to bundled service on their respective scheduled meter read dates during a one-month billing cycle is difficult to estimate in advance because many of the processes needed to do this are manual, and some processes vary depending on the number of service accounts affected. However, many of the services for which SCE has proposed explicit fees involve manual processes or variations in processes depending on volume of service accounts involved. Therefore, these characteristics do not present insurmountable obstacles to developing explicit rates for ESP Termination services.

For example, the same methods that SCE would use to develop a price for ESP Termination services "after-the-fact" can be used to develop rates for these services in advance because SCE knows the activities that are required to provide ESP Termination services, and what factors cause costs to vary. The Application states that ESP Termination of Service fees are not currently tariffed because the costs of this service were previously recovered through a regulatory mechanism consistent with Section 376.¹³⁰ Thus, SCE should have historical cost information for this service upon which to develop rates.

Rates for ESP Termination services that require manual processes can be developed using T/M studies of the activities involved, as SCE has done for many of the proposed service fees. SCE may also use an improved OEA that can be validated for reliability and accuracy, as discussed above. Where costs vary by the volume of service accounts affected, SCE should consider developing a sliding scale of rates for graduated volume levels. Similarly, where costs may vary by urgency of action (e.g., the need to return accounts to bundled service when scheduled meter read dates are imminent), a sliding scale based on required turnaround time should be considered.

8.4. Monthly Account Maintenance Fee

AReM states that the MAMF is a flat charge that is spread across all DA customers, regardless of which of those customers actually causes the utility to incur costs. AReM contends the MAMF does not comport with an incremental cost approach because it does not correctly attribute costs to the customer or the ESP that actually causes a service to be provided by the utility. ¹³¹ AReM asserts that DA customers and ESPs should pay only those charges that reflect actual and reasonable costs incurred by SCE to provide DA services to them, and objects to intra-class subsidies among DA customers.¹³²

AReM states that, based on SCE's billing determinants, 47% of the projected total DA service fee revenues are attributable solely to the MAMF. AReM contends that imposition of what it describes as a "catch-all" MAMF will cause the few remaining ESPs that serve residential customers to abandon that service and deter other ESPs that serve residential customers from entering the California DA market when the market is reopened.¹³³

AReM states that SCE is able to determine who causes services to be performed and to bill accordingly, and therefore, the MAMF should be replaced with fees that reflect the costs associated with specific services performed, with the fee paid by the customer or ESP that requested the service.¹³⁴

SCE responds that it would be administratively burdensome to break out each component of the MAMF into separate fees, and that ESPs would ultimately be charged the same aggregate amount anyway. SCE states that ESPs would simply pay multiple fees rather than one combined monthly fee. SCE contends that it is equitable and appropriate to impose a monthly fee on all DA participants because several components of the MAMF are fixed costs that apply equally to each DA participant, citing as examples the cost of operating account maintenance support systems, and producing reports SCE uses to perform DA services or to comply with DA reporting requirements.¹³⁵

SCE states that establishing separate fees for the MAMF components would require time-intensive and costly tracking in order to document each and every DA participant request or service required on behalf of a DA participant, and that it would be cost-prohibitive to do so. SCE contends requiring tracking of each and every credit inquiry or billing exception requires additional labor, and hence, additional costs that would be passed to DA participants.

SCE states that it does not currently have automated systems in place. SCE contends that creating a tracking system would be costly and is not cost-effective because of the low volume of DA participation, and that doing so would significantly increase costs to DA participants. SCE asserts that a fixed predictable monthly fee for all ESPs is convenient for ESPs because it allows ESPs and DA customers to contact SCE with credit and billing inquiries as needed without being charged for each contact, regardless of the number of inquiries.

According to SCE, the proposed MAMF of $1.35 per service account includes the cost of processing billing and metering exceptions, notifying ESPs of changes to customers' service accounts, responding to credit inquiries, operating account maintenance support systems, and processing non-energy billing charges.¹³⁶ Table 2 displays SCE's computed cost for each component of the MAMF and each component's percentage of the total MAMF cost:

SCE's assertion that it is administratively burdensome to break out each component of the MAMF into separate fees implies that cost causation principles should be followed, except when it is administratively burdensome to do so. SCE does not explain how establishing four individual fees instead of one combined fee is administratively burdensome when the Application proposes to establish 47 separate new service fees.

If assigning costs to those who cause the cost is the principle to be followed, then it is irrelevant that ESPs and DA participants as a group will ultimately be charged the same aggregate amount. SCE's reasoning would justify, in the name of administrative simplicity, establishing a single combined fee for all metering, billing and other DA services without regard to which ESPs or customers cause those costs.

To justify applying the proposed MAMF equally to all ESPs, SCE points to its account maintenance support systems as an example of costs included in the MAMF which apply equally to each DA participant. However, Table 2 shows that less than 1% of the costs related to the proposed MAMF are attributable to the support systems shared by all DA participants. In contrast, 33% of MAMF costs are attributable to billing and metering exceptions and 49% are attributable to the cost of notifying individual ESPs of changes to their particular customers' service accounts. Thus, most of the costs included in the MAMF are for processing exceptions or providing various levels of different services for some but not necessarily all ESPs.

D.97-10-087 determined that fees for non-discretionary services should be based only on recurring costs, and that only those non-recurring costs that vary with the number of ESPs should be recovered in fees for non-discretionary services.¹³⁷ D.97-10-087 states that, since all UDC customers have the ability to choose as a result of the DA program, recovery of costs associated with the development of a DASR processing system and other DA start-up costs, to the extent they are eligible for recovery, are appropriately recovered from all customers.

SCE contends that creating tracking systems for managing components of the MAMF would significantly increase costs to DA participants. However, D.97-10-087 specifies that non-recurring costs such as those costs associated with developing new systems and processes may not be included in fees for non-discretionary services, and directs that the fees for non-discretionary services include only costs that recur each time a transaction is processed in order to send the proper price signals to allow a competitive market to develop. SCE's argument concerning tracking system costs that would be passed to DA participants is inconsistent with the requirements of D.97-10-087.

SCE contends that a predictable monthly fee for all ESPs is convenient for ESPs because it allows ESPs and DA customers to contact SCE with credit and billing inquiries as needed without being charged for each contact, regardless of the number of inquiries. This reasoning is contrary to SCE's cost causation principles because some ESPs or their end-use customers may make extensive use of credit or billing services or require billing or metering exceptions, while others will not use these or other services frequently or at all but will still be required to pay the same monthly fee.

The proposed MAMF should not be approved because it does not comply with the requirements of D.97-10-087, and is not consistent with cost causation principles.

SCE has identified the activities for each service addressed by the proposed MAMF, and therefore could develop separate fees for each of these components. However, we believe that fees for any services contained in the proposed MAMF should be considered in the Anticipated Proceeding where we expect to consider the appropriateness of non-discretionary costs.

Any proposed fees for services addressed by the components of the proposed MAMF should include only the incremental costs that recur each time a transaction is processed, and only those non-recurring costs that vary with the number of ESPs. Any proposed fees for MAMF components should also be consistent with cost causation. That is, fees for exception services, for example, should be proposed on a per occurrence basis to be applied only when an exception is requested or required.

8.5. Other Non-Discretionary Service Fees

The proposed ESP Service Establishment fees, CISR fees, ESP Non-Energy Billing Receivables Fee and Meter Establishment Fee are based in part or entirely on OEA, which we find above to be unreasonable. Therefore, we do not approve the proposed fees for these services.

¹¹⁶ Exh. SCE-1, p. 8.

¹¹⁷ Fees for miscellaneous services include the MAMF, the ESP Non-Energy Billing Receivables Fee, the Special Services Request Fee and the Miscellaneous Customer Notification Fee.

¹¹⁸ Exh. AReM/CMTA-1, pp. 4, 10-11. AReM Opening Brief, p. 11.

¹¹⁹ Exh. AReM/CMTA-1, p. 5. AReM Opening Brief, pp. 13-16. AReM Reply Brief, pp. 7-10.

¹²⁰ Exh. SCE-2, p. 1.

¹²¹ Exh. SCE-1, pp. 30-36.

¹²² OP 3. (76 CPUC2d, 334.)

¹²³ Appendix A, Section E.21 (76 CPUC2d, 345.) Emphasis added.

¹²⁴ Because DASR fees are for non-discretionary services, they were deferred to the Anticipated Proceeding that will examine fees for non-discretionary services. (76 CPUC2d, 315.)

¹²⁵ SCE Opening Brief, Footnote 6, p. 2.

¹²⁶ SCE Rules 22.E.20.b and 22.E.21.

¹²⁷ Although we would expect a customer switching to a different ESP to contact the ESP and not SCE, SCE does not state whether such requests can be made directly to SCE.

¹²⁸ Currently, SCE has no authority to bill DASR fees to ESPs either.

¹²⁹ 76 CPUC2d, 307.

¹³⁰ SCE-1, p. 44.

¹³¹ AReM Opening Brief, p. 16.

¹³² AReM Opening Brief, p. 15.

¹³³ AReM Opening Brief, p. 14.

¹³⁴ AReM Opening Brief, p. 16.

¹³⁵ SCE Opening Brief, p. 11.

¹³⁶ SCE-1, p. 46.

¹³⁷ D.97-10-087 identifies non-recurring costs such as those costs associated with developing new systems and processes, while recurring costs are those that recur each time a transaction is processed. (76 CPUC2d, 307.)